Over the past year, the cryptocurrency market took a series of heavy punches from the Chinese government. The market took the hits like a btc usd investing warrior, but the combos have taken its toll in many cryptocurrency investors. The market bad performance in 2018 pales in comparison to its stellar thousand-percent gains in 2017.
What has happened?
Since 2013, the Chinese government have taken measures to modify cryptocurrency, but nothing compared to what was unplaned in 2017. (Check out this article for a detailed analysis of the official notice issued by the Chinese government)
2017 was a banner year for the cryptocurrency market with all the attention and growth it has achieved. The extreme price volatility forced the Central bank to take in more extreme measures, including the ban of initial coin offerings (ICOs) and clampdowns on domestic cryptocurrency deals. Immediately after, mining producers in China were forced to close down, citing excessive electricity consumption. Many deals and producers have relocated overseas to avoid regulations but stayed at accessible to Chinese investors. Nonetheless, they still fail to escape the claws of the Chinese Dragon.
In the latest series of government-led efforts to monitor and ban cryptocurrency trading among Chinese investors, China extended its “Eagle Eye” to monitor foreign cryptocurrency deals. Companies and bank accounts believed of carrying out transactions with foreign crypto-exchanges and related activities are subjected to measures from restraining disengagement limits to freezing of accounts. There have even been ongoing rumors among the Chinese community of more extreme measures to be unplaned on foreign platforms that allow trading among Chinese investors.
“As for whether there will be further regulatory measures, we will have to wait for orders from the higher authorities. inches Excerpts from an interview with team leader of the China’s Public Information Network Security Watch agency under the Ministry of Public Security, 28th February
WHY WHY WHY!?
Imagine your child investing his or her savings to invest in an electronic digital product (in this case, cryptocurrency) that he or she has no way of the business its authenticity and value. He or she could easily get lucky and strike it rich, or lose it all when the crypto-bubble burst. Now scale that to millions of Chinese citizens and we are talking about billions of Chinese Yuan.
The market is full of scams and pointless ICOs. (I’m sure you have heard news of people sending coins to random addresses with the promise of doubling their investments and ICOs that simply don’t make sense). Many unsavvy investors are in it for the money and would care less about the technology and innovation behind it. The value of many cryptocurrencies comes from market rumours. During the crypto-boom in 2017, participate in any ICO with either a famous counsellor onboard, a promising team or a decent hype and you are guaranteed at least 3X your investments.
A lack of understanding of the firm and the technology behind it, combined with the proliferation of ICOs, is a recipes for disaster. Members of the Central bank reports that almost 90% of the ICOs are deceitful or involves illegal fundraising. In my opinion, the Chinese government wants to ensure that cryptocurrency remains ‘controllable’ and not too big to fail within the Chinese community. China is taking the right steps towards a safer, more regulated cryptocurrency world, albeit aggressive and debatable. In fact, it might be the best move the country has brought in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I highly doubt so since it is pretty pointless to do so. Currently, financial institutions are banned from holding any crypto assets while individuals are allowed to but are banned from carrying out any forms of trading.
A State-run Cryptocurrency Exchange?
At the annual “Two Sessions” (Named because two major parties- National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPCC) both take part in the forumï¼held on the first week of Goal, leaders congregate to discuss about the latest issues and make necessary law efficiencies.
Wang Pengjie, a member of the NPCC dabbled into the prospects of a state-run digital asset trading platform as well as trigger educational projects on blockchain and cryptocurrency in China. However, the offered platform would require a authenticated account to allow trading.
“With the establishment of related regulations and the co-operation of the People’s Bank of China (PBoC) and China Securities Regulatory Commission(CSRC), a regulated and efficient cryptocurrency exchange platform would serve as a formal means for companies to lift funds (through ICOs) and investors to hold their digital assets and achieve capital appreciation” Excerpts of Wang Pengjie presentation at the Two Sessions.
The Goal towards a Blockchain Nation
Governments and central banks worldwide have struggled to grapple with the increasing popularity of cryptocurrencies; but one thing is sure, all have embraced blockchain.
Despite the cryptocurrency crackdown, blockchain has been gaining popularity and usage in various levels. The Chinese government have been supporting blockchain initiatives and enjoying the technology. In fact, the People’s Bank of China (PBoC) have been working on an electronic digital currency and have conducted make fun of transactions with some of the country’s commercial banks. It is still unconfirmed if the digital currency will be decentralized and offer features of cryptocurrency like anonymity and immutability. It wouldn’t come as a surprise if it actually is just a digital Chinese Yuan given that anonymity is the last thing that China wants in their country. However, created as a close substitute of the Chinese Yuan, the digital currency will be subjected to existing monetary policies and laws.
People’s Bank of China Governor, Zhou Xiaochuan. Source: CNBC
“Lots of cryptocurrencies may see beyond expectations growth which can bring significant negative have an effect on consumers and retail investors. We don’t like (cryptocurrency) products that utilize huge chance for rumours that offers people the illusion of getting rich overnight” Excerpts from Zhou Xiaochuan interview on Friday, 9th Goal.
On a media appearance on Friday, 9th Goal, Governor of People’s Bank of China, Zhou Xiaochuan criticized cryptocurrency projects that leveraged on the crypto-boom to monetize and fuel market rumours. He also noted that development of the digital currency is ‘technologically inevitable’
On a regional level, many Chinese cities have are driving blockchain initiatives to promote growth in their region. Hangzhou, famous for being the headquarters of Alibaba, have stated blockchain technology to be one of the city’s top priorities in 2018. The local government in Chengdu city have also been offered the building of an incubation center to foster the usage of blockchain technology in the city’s financial services.